Auto Insurance: Claiming Back Depreciation

Recoverable depreciation is the difference between the actual cash value (ACV) of a possession and its replacement cost value (RCV). In the context of auto insurance, this refers to the gap between the pre-accident value of a vehicle and its value after repairs have been made. This difference can be claimed back from the insurance company of the at-fault driver through a diminished value claim. Diminished value claims can be categorised as immediate, inherent, or repair-related. It is important to note that insurance companies in some states, such as Texas, are not obligated to pay for diminished value claims.

Diminished value claims help address the difference between your car's worth before and after an accident

Diminished value claims are a way to recover property damage from a responsible party. They help address the difference between your car's worth before an accident and after an accident. There are three types of diminished value claims: immediate, inherent, and repair-related diminished value.

Immediate diminished value claims refer to the difference in your vehicle's resale value before and after an accident, before any repairs are made. This type of claim is rarely used outside of court.

Inherent diminished value claims refer to the loss of a vehicle's worth or market value after repairs are made. Even with repairs, a vehicle's resale value decreases because it now has a history of damage. This is the most common type of diminished value claim.

Repair-related diminished value claims refer to a vehicle's loss in value due to faulty or insufficient repairs. This includes the use of low-quality parts or generic parts instead of original equipment manufacturer (OEM) parts.

To file a diminished value claim, you will need to gather evidence to demonstrate your vehicle's diminished value. This can be done by looking up your car's Kelly Blue Book value before and after the accident, getting a valuation from a used car dealer, or obtaining a quote from an auto repair shop. You will also need to determine whether to file a first-party or third-party insurance claim, depending on who was at fault for the accident.

It's important to note that diminished value claims may not always be successful, especially if you were at fault for the accident or if your vehicle had a lot of structural damage or high mileage before the accident. Additionally, the rules and requirements for diminished value claims may vary by state, so it's recommended to consult with a personal injury lawyer to understand your specific case.

You can only file a diminished value claim if the other driver was at fault

If you've been in a car accident that wasn't your fault, you may be able to file a diminished value claim to recoup some of the financial losses incurred as a result of the diminished value of your vehicle.

A diminished value claim allows you to recover the difference between your car's pre-accident value and its value after repairs from the insurance company of the at-fault driver. Even when repairs are made, a car's market value typically drops after an accident. This means that, even in pristine, post-repair condition, your car is worth less than an identical vehicle that hasn't been in an accident.

Types of diminished value claims

There are three types of diminished value claims: immediate, inherent, and repair-related diminished value.

Immediate diminished value

This type of claim recoups the loss in resale value that occurs immediately after an accident but before the vehicle has been repaired. It is rarely used outside of court proceedings.

Inherent diminished value

Inherent diminished value claims relate to the loss in market value after repairs are made. Because the vehicle has a history of damage, it is worth less to potential buyers.

Repair-related diminished value

If substandard repairs are made to a vehicle, it may not be possible to return it to its original condition. In this case, you can file a claim for repair-related diminished value. For example, if low-quality parts are used or there is an issue with the paint quality, the vehicle's value may diminish.

Who can file a diminished value claim?

As well as the other driver being at fault, there are several other requirements that must be met to file a diminished value claim. These include:

• You own the car (you typically can't file a claim on a leased vehicle)
• You own a high-value vehicle (newer than 10 years old, with no history of accidents)
• You meet title requirements (your car doesn't have a rebuilt or salvage title)
• The other party was uninsured
• You live in a state that allows diminished value claims (most states require the other driver to be at fault)

Most insurance companies use the 17c diminished value formula to determine the value of a vehicle after an accident. This involves four steps:

• Determine the value of your car using an online calculator like the National Automobile Dealers Association (NADA) or Kelley Blue Book (KBB) websites
• Apply a 10% cap to that value (the maximum amount the insurance company will pay out)
• Apply a damage multiplier (depending on the severity of the structural damage)
• Apply a mileage multiplier (based on the vehicle's mileage)

You can't file a diminished value claim if you caused the accident

If you caused the accident, you generally can't file a diminished value claim against your own insurance policy. Insurance companies will not process diminished value claims if you were at fault for the damage, so you are not eligible to do so if you caused the accident yourself.

If the other driver was at fault, you may be able to file a diminished value claim with their insurance company. This is known as a third-party claim. However, if the other driver was uninsured or underinsured, you may still be able to file a claim with your own insurance company if you have uninsured motorist coverage.

Diminished value refers to the loss in a vehicle's market value after it has been damaged in an accident. Even if the vehicle is repaired and restored to its pre-accident condition, it will still have an accident history, which will negatively impact its market value. A diminished value claim allows you to recover the difference between your car's pre-accident value and its value after the repairs.

There are three types of diminished value claims:

• Immediate diminished value: This type of claim refers to the loss in resale value that occurs immediately after an accident but before the vehicle is repaired. It is primarily used in court and is rarely used when filing a claim with an insurance company.
• Inherent diminished value: This is the most common type of diminished value claim. It refers to the loss in market value of a vehicle even after repairs are made. The vehicle will sell for less than it would have prior to the accident because it now has an accident history.
• Repair-related diminished value: This type of claim applies when substandard repairs are made to a vehicle following an accident, and it cannot be returned to its original condition. This could include the use of low-quality parts or issues with paint quality.

To file a diminished value claim, you will need to prove the car's diminished value. This may involve providing photos and documents of the accident scene and damage to your vehicle, as well as obtaining an appraisal from a certified vehicle appraiser. It is also important to note that state regulations may impact how diminished value claims are handled, so it is advisable to research the laws in your state.

You can't file a diminished value claim on a leased vehicle

Diminished value claims allow you to recover the difference between your car's pre-accident value and its value after repairs. This is done by filing a claim with the insurer of the at-fault driver. However, you typically cannot file a diminished value claim on a leased vehicle because you don't own the vehicle. The owner/lessor is entitled to the claim as they are the registered owner.

The issue of diminished value on a leased vehicle depends on the wording in the lease agreement and the policies of the lessor. Some lessors may allow the claim proceeds to go to the lessee, but it's best to contact the lessor and discuss the issue with them. Ultimately, the argument is that the lessee is harmed because they are still contractually obligated to pay the same monthly lease payment after the accident, even though the car is now worth less.

There are three types of diminished value claims: immediate, inherent, and repair-related diminished value. Immediate diminished value claims are made to recoup the loss in resale value that occurs immediately after an accident or before a vehicle has been repaired. Inherent diminished value claims are filed when a vehicle loses market value even after repairs are made, decreasing its resale value. Repair-related diminished value claims can be filed if substandard repairs are made to a vehicle, and it cannot be returned to its original condition.

To determine if you can file a diminished value claim, consider the following:

• The other party was at fault.
• You own the car.
• You own a high-value vehicle (newer than 10 years old with no history of accidents).
• You meet title requirements (your car does not have a rebuilt or salvage title).
• The other party was uninsured or underinsured.
• You live in a state that allows diminished value claims.

You can file a diminished value claim if the other driver was uninsured

If your car has been in an accident, its market value will likely decrease, even if it has been restored to its pre-accident condition. This is known as diminished value. Diminished value is the difference between your car's market value before and after the accident.

If you are in an accident where an uninsured or underinsured driver is at fault, you may be able to file a diminished value claim with your insurer against your uninsured motorist property damage coverage, if you have it.

To file a diminished value claim, you will need to:

• Check the insurance company's process for filing a diminished value claim.
• Document the car's market value using Kelley Blue Book or NADA calculator tools.
• Prove your car's diminished value. Having photos and documents of the accident scene and damage to your vehicle may help your case. You may need to get an appraisal from a certified vehicle appraiser as part of the claims process.
• Satisfy all the insurance company's conditions for diminished value and file your claim.

It's important to note that state regulations may also affect how diminished value claims are handled. For example, in California, you can file a claim for diminished value as a third-party claim with the at-fault driver's insurance company, and the statute of limitations is 3 years.

Frequently asked questions